Building Asset-Based Market Infrastructure Best Alternative for Global Economy

(Updated 102408 – Formatting)

(RePosted 110110)

DJIA 9 October 2008

Few doubt that the collapse of the world economy will be a Game Changer. But the change needed is to a new game – a new infrastructure. Not a set of minor changes to the same game.

What is the “game?” The current model, which has gone down like a house of cards in a stiff breeze, is one tilted towards the interests of corporations, governments, and against those of the Individual. It is based on various gradations of slavery, wage-slavery, consumerism predicated on freely available credit at usuriousrates, predatory lending practices against victims disarmed by law, and perpetual debt. We have created a debt-based global political economy, not an asset and equity based model.

Yet a non-debt based economic system is what we, the Individual Humans who collectively comprise the global economy, need the most.

We need to base our 21st Century political economies on equity, and assets. Debt is a tool to grow equity and assets, not a substitute for it. (Unless You are designing a slavery or permanent indentured sort of system. It’s tougher to do that in a civil democracy. And bear in mind the sort of Individually held asset and equities basis of global political economy hypothesised here is not the same as asset-egalitarianism. It merely alludes to a reworking of the global financial system in a way that moves the advantage to the Individual accumulation of wealth over the current emphasis and advantage accorded to the corporate concentration of wealth.)

“No job is safe. American elites and corporate tycoons are loading the boats and heading for foreign shores. The only thing they’re leaving behind is the insurmountable debt that will be shackled to our children into perpetuity and the carefully arranged levers of a modern police-surveillance state.”

The past three weeks have seen the front line dominoes tumble as the jury-rigged infrastructure of perma-debt collapsed before the eyes of those reputed to for years to be the smartest and boldest “risk takers” leading the global economy. The most rabid force for de-regulation, the US Republican Party led by George W. Bush, is winding up its occupation of the Oval Office by nationalising the most pivotal parts of the US Banking System.

One by one, the remaining investment institutions have queued up for a government bailout that gives governments an equity stake.

Of course, in the US these massive infusions of government cash and guarantees are backed by the Treasury – which means borrowing from other nations, principally China. And the repayment of this new debt will naturally fall on the US taxpayer, absent any serious reform.

LIBOR and the TED Spread are only immediate indicators of the credit market’s liquidity. The larger issue of infrastructure reform needs to consider how to build an asset-based, as opposed to debt-driven, political economy. And that means encouraging the accumulation of assets and equities by Individuals, as opposed to corporations. This impacts the structure and regulation of credit markets.

International leaders participating in the upcoming series of summits need to pay particularly meticulous attention to this.

For unless they obey the current inflection point and switch the game over to an asset-backed model of consumer spending, no amount of government intervention will preserve the current debt-driven model based on cannibalised captive markets.

Bubble Gum, Spit, and String

Such efforts as purchasing toxic assets, and injecting captial into the banks are short term patches of bubble gum, spit and string, and I surely hope our international leaders realise that. There are already signs from the banks such injections, alone, won’t work. The upcoming series of economic summits needs to focus on establishing a long term market model that honestly gives Individual Citizens a fair shake, and a more prominent role as stakeholder in the global system.

In the recent past I have been pessimistic about the real willingness of our leaders to address the root causes of this crisis. On September 26, before the bailout was passed, in an email to Congress, I asked “Where is the call for an international summit with our WTO trading partners, particularly China?”

But the pressure on the US by international leaders for it’s participation in a series of summits to address the current crisis in the economy gives me cause to reconsider my cynicism.

In this sort of environment, consumer spending drives everything. Like Love, it makes the world go ’round. Henry Blodget did a lucid piece the other day on ClusterStock, entitled “US Consumers are Broke.” I highly recommend it.

Equity/Asset Based Games vs Debt Games

If our global economic system threatens to collapse, as it is, and if consumer spending (particularly US consumer spending) is the engine; then we need to pay particularly close attention to the infrastructure changes our international leaders will try to design to address the crisis.

We don’t need to merely patch up the existing debt-based paradigm, except on the shortest term. What we need to do is change the game to an asset and equity basis.

Consumer Credit should no longer be used as an Orwellian cyber-leash on the populace. Instead, in building an asset-based market, the Individual owns and excercises real and legally enforceable control over their credit and other financial information. The role for reporting agencies are transformed to data services competing to be the delivery agent for the Individual. That means a much more direct relationship with those who would access that information – which would no longer be the sort of commercial product that automatically becomes subject to data mining.

Real protections against predatory lending instruments need to be instituted – that means no more Adjustable Rate Mortgages (ARMs), no more Balloon Payment, or Interest Only, or so-called option-ARMs.

That also means a cap on credit card rates, and a prohibition of unilateral rate changes based on the consumer’s account status with any other lender. So one’s credit card rate doesn’t suddenly jump from 8 to 62 percent because you forgot to pay the electric bill last month – a bill you never pay with that credit card. But the card company data mines your payment stream, sees the omission, and cranks up the rate. Such behavior tends to gut the future ability of the account to maintain a credit relationship, and is thus cannibalistic of it’s own market.

This is what has happened to the US Consumer in this economic game of debt. This is why the US Consumer is broke. This is why the US Consumer is wary of credit, mortgage, and investment instruments tilted against them. Any serious infrastructural reform that will last must address these very real concerns, and not just give them lip service.

Money To Be Made- More Reliably in Asset Based Economy

If US consumer spending has been such a great engine for growth and expansion in international trade, think of what a robust middle class would mean when combining the consumer spending of the US, China, India, and the EU. In an international monetary system driven by the Individual accumulation of wealth, the emergence of a solid middle class would be an increasingly strong economic engine. Perhaps international leaders should consider flattening the economic landscape in their upcoming efforts to build a newer, more resilient global economic system. Rules and regulations should be guided by the express intent to enable and build up individual assets and equities, as opposed to corporate debt.

We must abolish the current idea of “minimum” wage and migrate to the concept of the Living Wage, indexed to the actual cost of living.

We need to encourage the invention of financial instruments for Individuals which give them certain and distinct advantages over existing corporate institutions, as a safeguard of their ability to accumulate wealth and contribute to the engine of asset and equity based consumer spending. Predatory corporate and financial instruments are a certain death to such aims.

This means eliminating all taxes on personal income, personal savings and investments, to encourage and facilitate the accumulation of wealth regardless of class.

This will mean not just more banking regulation and tighter supervision over the mortgage and derivatives markets, but increases in wages across the board, across the world, in all countries participating in this restructuring.

In a global political economy that properly uses debt as just another tool to facilitate the building up of the actual wealth of the People, and not as a centerpiece to drive markets, the health and robust growth of a more reliable form of Consumer Spending is ensured.

That’s all I have time to write for this weekend. More later. Until then, the Fabulous O’Jays!

The Cover of the Rolling Stone” is a song by Shel Silverstein satirizing success in the music business.

Its narrator laments that his band has not been featured on the cover of Rolling Stone magazine despite having the superficial attributes of a successful rock star, including drug usage, “teenage groupies, who’ll do anything we say” and a frenetic guitar solo.The song was first recorded by Dr. Hook & The Medicine Show, reaching number six on the U.S. pop chart. It was the band’s second single, and the band did get on the cover of Rolling Stone — albeit in caricature rather than a photograph and with the caption “What’s-Their-Names Make The Cover”.

BBC Radio refused to play the song, as it contained the name of a commercial publication (Rolling Stone) and could therefore be considered advertising. The song was re-recorded and rush released in the UK as “The Cover of the Radio Times” (Radio Times being the name given to the weekly television and radio guide published by the BBC), which did find its way onto playlists.

This is my set from the Open Stage at the 2010 Mountain Laurel Autoharp Gathering in Newport, PA. Recorded June 25, 2010. I played “I Truly Understand” (traditional), “She’s A Woman” (McCartney), and “Stealin'” (traditional).

I made a bunch of Resonators for the show, and spoke briefly about them after the first tune. Gregg Averett, the MC, had some very kind words about my performance. I hope I can live up to them.-dcm

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Here’s the latest video I’ve had a chance to upload from the weekly jams I’ve been recording.

The tale is told of slaves in the American South at the end of the Civil War singing this to one another, hearing the gunboats coming up the river.

An online search turned up this accounting of lyrics. More importantly, it turned up this banjo rendition. It seems a useful reference archetypal symbol, musically speaking. Moreover, I found this awesome list!

Since February 1, 2010, I have been posting video of the old time jam and hobo music at John’s Pub in Mystic CT on monday nites (the jam, not the posting).